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December 15, 2012

Giving and Taking

To the Editor: It should be understood by those richly rewarded "new philanthropists" ("The Giving Generation," Penta, Dec. 3) that they should be very philanthropic because they did not reap these bountiful rewards by themselves. The government made their successes possible—and it expects to get its fair share in return. Roland Martin Carmel, Calif.

To the Editor: I encountered your article on making gifts before the end of this year. It stated that the "gift by promise" strategy—which I invented—only works in Pennsylvania. That is not true. As I have argued in my articles, a promise will be enforceable in any state and therefore will successfully use up this year's gift-tax-exemption amount if it is made in exchange for a bargained-for consideration. Austin Bramwell Milbank, Tweed, Hadley & McCloy New York City

Elizabeth Ody replies: We can't rule out the possibility that a cleverly structured donative promise could be effective—and treated as a completed gift for tax purposes—in states other than Pennsylvania. But Pennsylvania is currently the only state to have enacted law that explicitly provides that a written promise may be enforceable if the signer states that he or she intends to be legally bound.

Energy Reserves

To the Editor: As I read the Dec. 3 Editorial Commentary ("A Cause for Thanksgiving, Part II"), advocating much more exploration for oil and gas on government-owned land, and condemning a go-slow approach, I thought of a fisherman's simple but astute observation to me years ago: "People are getting more plentiful; land is not." Thank goodness our government owns and can preserve land for generations hundreds of years from now, when our nation will really need the oil and gas. Instant gratification does not make wise policy.

But I could not agree more with the editorial about our nation's screwed-up ethanol policy. Dr. Robert LeFevre Modesto, Calif.

To the Editor: Some of your coastal readers might be interested to know that even during this historic drought year, leading grain-producing states like Iowa still produced 80% of the corn that is harvested during a year of normal precipitation.

The public would also benefit from knowing that of the 40% of corn that comes into an ethanol plant through the front door, two-thirds comes out the back end [after ethanol is made] as animal feed.

Over the past 20 years, farm yields across the Midwest for grain crops like corn have doubled in response to greater U.S. and world demand. These yield increases (and accompanying income) at the farm gate wouldn't have happened without price signals to encourage more innovation and production, benefiting a host of stakeholders in the farm economy all the way up the food chain to Fortune 500 companies like Monsanto and Deere that sell seed and tractors to these farmers.

Corn-based ethanol isn't the end solution, and its pluses and minuses are not equally distributed across the farm economy, but it is a step in the right direction if we want to have a sophisticated bio-refinery infrastructure that someday can produce renewable fuel from a variety of nonfossil sources. John Norwood West Des Moines, Iowa

Improbable Substitution

To the Editor: Imagine if someone rewrote the first two sentences of the Dec. 3 ETF Focus column ("The 'Real' Gold Rush") and substituted "stock" for "gold": "Both retail and institutional investors have been rushing into stock ETFs this year. Stock prices may indeed have further to rise, but that doesn't mean you should join the frenzy."

Those two sentences will never be written. The system is hostile toward gold because the price of gold reflects the dollar destruction that must be hidden from the populace. Buy what is going up and sell what is going down regardless of asset characteristic. Mike Mezmar Mezmar Money Management Harlingen, Texas

Habits of the Bear

To the Editor Is John Hussman bearish ("A Real Cliff Hanger," Up & Down Wall Street, Dec. 3)? Does a bear defecate in the woods? As Alan Abelson duly noted, Hussman has compiled quite a record over the years, staggering in both its grandness and ineptitude. From Nov. 21, 2000, to March 9, 2009, the low of the last down cycle, his flagship Hussman Strategic Growth Fund gained 92% while the Vanguard Total Stock Market Index Fund lost 37%. Since March 9, 2009, to Dec. 5, 2012, his fund lost 11% while Vanguard Total Stock gained over 130%.

I love Hussman's discipline, research, transparency, and integrity, but his overreliance on fundamental and economic indicators, with very little weight on technicals, has led him astray. Valuation indicators are terrible for timing. Even after last year's 20% decline in the Standard & Poor's 500, to 1100 in October, he remained nearly fully hedged and has remained mostly that way to the present. One has to wonder how far the S&P would need to fall for him to turn constructive.

I'm rooting for him to regain his touch. John is good for our industry, and does so many things the right way. Our firm owns over $13 million of his fund on behalf of our clients, a number of whom have questioned our sanity.

In the world of Wall Street, if you're bullish and wrong, you usually have plenty of company. But if you're bearish and wrong, it's almost unforgivable. Bob Kargenian TABR Capital Management Orange, Calif.

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